When an employee files a medical claim, that claim is then sent off to the insurance carrier to be approved. The process of determining whether or not a claim will be paid or denied is referred to as adjudication. If a carrier agrees to auto-adjudicate, the review process is then minimized. This means that certain claims may be auto-approved, which can be both good and bad. 

The positive to auto-adjudication is that claims are reviewed more quickly. The negative is that some bills may be approved despite errors being present. Auto-adjudication can also cause employer costs to rise. 

When carriers begin negotiations with hospitals, the initial hospital rate is known as the “chargemaster “ price. Once the chargemaster price is established, the insurance carriers will negotiate with the hospitals to achieve a better rate. 

If the hospitals agree to lower their costs, carriers will often include the hospitals in their network, all but guaranteeing patient volume. The hospital may then offer even further discounted rates should the insurer agree to auto-adjudicate a certain number of claims. For this reason, many carriers will include auto-adjudication in their claims process. 

Hospitals get paid more quickly when claims are auto-adjudicated. This is because the adjudication process can be time-consuming, and it ultimately slows down the billing cycle for hospitals. This bottleneck can also add cash-flow pressure to their operations. When insurers agree to auto-adjudicate claims that are thought to be correct, that pressure is reduced, and it allows for a smoother cash flow process overall.

Related Terms: Health Insurance